TARP IN CONTEXT: OTHER GOVERNMENT PROGRAMS TO ASSIST THE FINANCIAL SECTOR

By itself, the Troubled Asset Relief Program (“TARP”) is a huge program at $700 billion. As discussed in SIGTARP’s April Quarterly Report, the total financial exposure of TARP and TARP-related programs may reach approximately $3 trillion. Although large in its own right, TARP is only a part of the combined efforts of the Federal Government to address the financial crisis. Approximately 50 initiatives or programs have been created by various Federal agencies since 2007 to provide potential support totaling more than $23.7 trillion.

The Federal Reserve has been one of the lead agencies responding to the financial crisis — increasing its balance sheet to more than $2 trillion to implement a wide range of programs designed to stimulate liquidity in financial markets, as well as several institution-specific interventions.321 The Federal Reserve’s $2 trillion balance sheet (which grew from approximately $900 billion prior to the financial crisis to a peak of nearly $2.3 trillion in December 2008),322 however, does not reflect the true potential amount of support the Federal Reserve has provided to those programs, which is estimated to be at least $6.8 trillion. This is because many of the programs involve guarantees that, although not listed on the balance sheet, expose the Federal Reserve to significant losses if the assets they are backing deteriorate in value.

Other players in the Government’s efforts include the Federal Deposit Insurance Corporation (“FDIC”), which has contributed more than $2 trillion in new gross potential support. The newly created Federal Housing Finance Agency (“FHFA”) — under whose auspices fall the Government-Sponsored Enterprises (“GSEs”) such as Fannie Mae, Freddie Mac, and Federal Home Loan Banks (“FHLBs”) — has effectively provided more than $6 trillion in gross potential support. Meanwhile, Treasury itself has programs outside of those authorized under the Emergency Economic Stabilization Act (“EESA”), and has supplied potential support beyond TARP of approximately $4.4 trillion. An overview of the Government’s new potential support relating to the financial crisis is listed by Federal agency in Table 3.4.

Of this $23.7 trillion in assistance to financial institutions, participants in non-TARP programs are not subject to TARP’s restrictions and conditions, such as executive compensation, nor do they necessarily require specific Congressional approval. Although SIGTARP’s oversight responsibility is for the operations of TARP and directly related programs (such as TALF and the Public-Private Investment Program (“PPIP”)), it is necessary to understand the larger context in which TARP operates, the linkages between TARP and the trillions of dollars of other Government initiatives. As noted earlier, SIGTARP has no authority over any of the non-TARP activities of the agencies discussed below.